What Happens When Shareholders Socialize?

New websites may give individual shareholders an easier way to vote their shares.Marielle Segarra, CFO MagazineSeptember 1, 2011

Let's face it: CFOs and other executives can be a little old school when it comes to social media. Companies don't always want to expose their inner workings on Twitter or Facebook, and for good reason — not the least of which is the risk of violating Regulation FD. But when it comes to corporate governance, they may have to rethink their silence. Websites like StockTwits and Moxy Vote have provided shareholders an online platform to discuss their stocks and organize around causes in real time. In some cases, individual shareholders voting through such sites have been able to oust CEOs and stop mergers and acquisitions in their tracks.

Few sites have had as much success in this as Moxy Vote, a free service that launched in 2009 and allows small shareholders to join forces with established advocacy groups that share their views. Moxy Vote aims to harness the influence that individual investors possess but almost never use; although individual shareholders hold about 30% of shares outstanding, they vote their proxies at a far smaller rate.

Moxy Vote allows visitors to choose a specific issue — everything from corporate governance to animal welfare — and learn which way various advocacy groups are advising them to vote. They can add their names to a list of people who care about the cause, thus signaling to companies that they are paying attention, and also learn how to actually vote their shares in accordance with the issue, either manually or through a Moxy Vote–assisted system.

One goal of the site is simply to save shareholders time. "If I own 20 stocks, you can imagine how long it takes me to find information about each issue up for a vote," says Mark Schlegel, co-founder of Moxy Vote. The site also taps into one of social media's other strong points: its ability to mobilize. "If users think, 'Hey, I can mobilize my friends to show up at a concert I'm going to,' they can just as easily say, 'I can mobilize my friends who own shares of [a company] to vote against [the chair's] reelection,'" he says.

The strategy appears to be working. Last proxy season, advocacy groups that use Moxy Vote as a way to be heard filed 360 shareholder proposals addressing everything from the disclosure of political contributions to a restaurant chain's use of cage-free eggs.

That said, there is little evidence that individual investors are voting their shares more frequently than they used to. In fact, last year's figure, at just 15%, was actually down 2% from 2008. Advocates say this will change as the sites become better known. For now, companies have to decide whether to wait and see, or become involved. In fact, some companies have shown an interest in getting their own views expressed on Moxy Vote; the site hopes to allow a handful of companies to do just that next proxy season.

Declass Acts

Although absent from the roster of concerns on Moxy Vote, the issue of board declassification received plenty of investor support this past proxy season. Proposals to have all board members elected annually, versus serving staggered terms, received favorable votes at 35 of the 38 companies where such measures were proposed. One reason, according to Institutional Shareholder Services (ISS), is that these proposals targeted large-cap firms more often this year than in years past. Such companies are more likely to have institutional share ownership, and those owners may have been persuaded by activists who say that annual elections are a way to override a company's poison-pill defense measures. According to ISS, in 2005 a slight majority of S&P 500 companies had staggered board terms. That figure has dropped to 31%, and another 3.4% plan to declassify their boards soon. — S.L.